SLR Investment (US:SLRC)2023-03-01 20:33Financial Data and Key Metrics Changes - For Q4 2022, the company reported net investment income of $0.41 per share, fully covering distributions, an increase from $0.37 per share in Q3 2022 [10][35] - Net asset value per share decreased slightly to $18.33 from $18.37 at the end of Q3 2022 [11][32] - Gross investment income rose to $54.1 million from $47.6 million in the previous quarter, while net expenses increased to $31.6 million from $27.5 million [34] Business Line Data and Key Metrics Changes - The comprehensive portfolio at year-end was approximately $2.9 billion, with 99.8% in senior secured loans, and 98.6% in first lien loans [39][40] - The weighted average asset level yield increased to 12.2% from 11.3% in the previous quarter [42] - The Sponsor Finance segment originated $58 million in new loans, with repayments of $118 million, resulting in a portfolio of $643 million [48] - The ABL segment saw a portfolio total of $1 billion, with an average asset level yield of 14.1%, up from 12.3% [53] - The Equipment Finance portfolio totaled $900 million, with a weighted average asset level yield of 10.7% [56] - The Life Science segment had a portfolio of $322 million, contributing 20% of gross investment income for Q4 [60] Market Data and Key Metrics Changes - The current market conditions for new investments are described as the most attractive in several years, with a significant increase in yields on private loans [15][46] - The company has over $650 million in available capital to capitalize on investment opportunities [28] Company Strategy and Development Direction - The company plans to continue growing its portfolio, expecting 2023 to be an attractive vintage for both cash flow and specialty finance loans [21][65] - The investment adviser secured $3.8 billion in additional capital, enhancing the company's competitive sourcing advantage [24] - The company emphasizes a conservative underwriting approach, focusing on first lien cash flow loans and asset-based loans to mitigate risks during economic volatility [64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality of the portfolio, supported by a comprehensive stress test [13][89] - The company anticipates further growth in net investment income per share in 2023, driven by deploying available capital into higher-yielding assets [21][65] - Management noted that borrowers are increasingly turning to asset-based lending for working capital and liquidity management during uncertain economic times [25] Other Important Information - The company repurchased approximately $3 million of shares at an average price of $13.98 during Q4 [30] - The company has a strong funding profile, with half of its $1.1 billion funded debt comprised of senior unsecured fixed-rate notes at a weighted average interest rate of 3.9% [26] Q&A Session Summary Question: How long does it take for the portfolio to turn over and what yields are being obtained? - The portfolio has a high churn rate, and new assets are being deployed above the current yield of 10.7% [68] Question: Does the equipment financing portfolio include loans backed by crypto mining machines? - No, the equipment financing portfolio does not include such loans [72] Question: Which of the four sectors looks relatively more attractive for growth? - ABL is expected to outpace other segments due to current market conditions, with steady activity in Sponsor Finance and Life Science segments [76][78] Question: What is the average life of the assets in the ABL portfolio? - The average duration of loans is typically 5 years, with an average duration closer to 2 years [110] Question: What is the source of funds for the repayment of the $75 million unsecured notes? - The repayment was funded through a combination of pre-refinanced capital and the revolving credit line [92] Question: Will the stock repurchase program be extended beyond May? - The program is likely to be extended, allowing flexibility to take advantage of market conditions [96]